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What's in the Offing for HollyFrontier (HFC) in Q1 Earnings?

HollyFrontier Corporation HFC is set to release first-quarter 2021 results before the opening bell on May 5. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 45 cents per share on revenues of $2.79 billion.

Let’s delve into the factors that might have influenced the fuel supplier’s performance in the March quarter. But it’s worth taking a look at HollyFrontier’s previous-quarter performance first.

Highlights of Q4 Earnings & Surprise History

In the last-reported quarter, the Dallas, TX-based downstream operator missed the consensus mark due to weak refining margins. HollyFrontier reported adjusted net loss per share of 74 cents, wider than the Zacks Consensus Estimate of a loss of 72 cents. However, the oil refiner’s quarterly revenues of $2.9 billion beat the Zacks Consensus Estimate by 9.1% on the back of stronger-than-expected throughput and robust results from the pipeline division.

As far as earnings surprises are concerned, HollyFrontier beat the Zacks Consensus Estimate in three of the last four quarters and missed in the other, delivering an earnings surprise of 24.28%, on average. This is depicted in the graph below:

HollyFrontier Corporation Price and EPS Surprise

HollyFrontier Corporation price-eps-surprise | HollyFrontier Corporation Quote


Trend in Estimate Revision

The Zacks Consensus Estimate for the first-quarter bottom line remained the same in the last seven days. However, the estimated figure indicates a 184.91% drop year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests an 18.06% decrease from the year-ago period.

Factors to Consider This Quarter

The economic disruption caused by the coronavirus outbreak and the associated demand destruction for refined products and transportation fuels on account of widespread disruption are likely to have hurt earnings and cash flows of downstream operators like HollyFrontier. This will likely continue for the next few quarters.

Adjusted loss from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $111.5 million in the fourth quarter. This reflected a massive plunge from the year-ago quarter’s income of $171.6 million, primarily due to sharply narrower gross margins, as steps to limit the spread of coronavirus significantly disrupted product demand. The downward trend is most likely to have continued in the first quarter with coronavirus still keeping the majority of customers away from travel and fuel consumption yet to recover meaningfully. In fact, the Zacks Consensus Estimate for the to-be-reported quarter’s refining margins stands at $6.88 per barrel, implying a 54.9% decrease from $15.27 in the January-March period of 2020. Consequently, HollyFrontier's cash flows are likely to have been negatively impacted.

Apart from continued macro hurdles, HollyFrontier’s first-quarter numbers are also likely to have suffered due to surging expenses to comply with cleaner gasoline production rules (or RIN costs), plus volume and cost impacts from the winter storms. As a reflection of this, the Zacks Consensus Estimate for the company’s refining throughput is pegged at 395,000 barrels per day (bpd), indicating a decrease of 16.3% year over year.

However, on a somewhat positive note, the company’s pipeline unit is expected to have performed better. The segment includes HollyFrontier’s majority interest in Holly Energy Partners L.P. HEP, a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets. The Zacks Consensus Estimate for unit’s sales and other revenues is pegged at $131 million, up from $127.9 million in the year-ago period. This is expected to have provided some support to the company’s first-quarter results.

What Does Our Model Say?

The proven Zacks model does not conclusively show that HollyFrontier is likely to beat estimates in the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -0.92%.

Zacks Rank: HollyFrontier currently carries a Zacks Rank #3.

Stocks to Consider

While an earnings beat looks uncertain for HollyFrontier, here are some firms from the energy space that you may want to consider on the basis of our model:

Whiting Petroleum Corporation WLL has an Earnings ESP of +7.27% and a Zacks Rank #1. The firm is scheduled to release earnings on May 5.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Viper Energy Partners LP VNOM has an Earnings ESP of +40% and is Zacks #2 Ranked. The firm is scheduled to release earnings on May 3.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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Holly Energy Partners, L.P. (HEP): Free Stock Analysis Report
HollyFrontier Corporation (HFC): Free Stock Analysis Report
Viper Energy Partners LP (VNOM): Free Stock Analysis Report
Whiting Petroleum Corporation (WLL): Free Stock Analysis Report
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